Today’s report by the Institute for Supply Management showed that conditions for the manufacturing sector improved significantly in October. The closely-watched Purchasing Managers’ Index (PMI) increased to 55.7 last month (the highest level since April 2006) from 52.6 in September and remained above the threshold level of 50 for a third-consecutive month, a good indication that manufacturing is in recovery. By comparison, following the end of the 2001 recession, it took two years for the PMI to reach its current level. This is a hopeful sign that a more-pronounced upturn in manufacturing activity is now brewing.
With much of the growth in the manufacturing sector in the third quarter driven by the motor vehicle sector due to the “Cash for Clunkers” program, today’s report signals that a manufacturing recovery is spreading beyond autos, and conforms with last week’s Commerce Department report that new orders for durable goods outside of transportation rose significantly in September.
Good news continues on the export front. Today’s report showed that new export orders rose to a level of 55.5 last month. In the last recovery, this level of export activity did not take place until the second half of 2003. With economic growth improving abroad and the dollar back to where it was a year ago, export growth appears to be continuing into the fourth quarter, which is welcomed news.